World Cup No Cure for Brazil's Woes

Hosting the 2014 FIFA World Cup was supposed to provide an unalloyed boon to Brazil’s global image. Yet tournament preparations have highlighted many structural weaknesses in Latin America’s largest country, and predictions that the World Cup will deliver enormous economic benefits should be treated with skepticism.

Few scholars understand World Cup economics better than Dennis Coates, a professor at the University of Maryland, Baltimore County. In a 2010 paper, he examined the relevant research and concluded that ‘the clear economic beneficiaries of World Cups have been international and national soccer organizations,’ not host cities or national economies. Coates cited three studies in particular: Wolfgang Maennig determined that the 2006 World Cup provided ‘no meaningful boost to the German economy.’ Robert Baade and Victor Matheson calculated that ‘American host cities during the 1994 World Cup experienced declines in income’ (emphasis added). Maennig and Florian Hagn found ‘no lasting impact of the 1974 World Cup on German employment.’

But surely Brazil can expect an economically significant jump in tourist spending, right? After all, the government anticipates that the 2014 World Cup will lure roughly 600,000 foreign tourists and another 3 million domestic tourists to the host cities. Yet these numbers will not automatically translate into a major net increase in tourist traffic, tourist expenditures, or local economic activity.

Such an increase will depend on World Cup tourism being much greater than normal Brazilian tourism, because (1) many World Cup tourists will simply displace regular tourists, and (2) some Brazilians will leave their home cities to avoid the crowds and daily interruptions associated with the tournament. As Coates explained in his paper, ‘there is a wide array of evidence that sports mega-events, including the World Cup, have little net impact on the number of tourists arriving and staying at the host destination. Without substantial tourists over and above the normal tourist traffic, unless the World Cup fans spend substantially more than the usual travelers, there can be little new impact on the local economy of the mega-event.’

For all those reasons, we should not overhype the economic effects of World Cup 2014. There will obviously be short-term gains for Brazilians working in construction and other industries, but the tournament will probably not deliver a permanent boost in income or employment levels. Indeed, many of the hugely expensive stadiums that are being built for the World Cup may sit empty and unused after the festivities are over, much like the stadiums that were constructed for the 2008 Summer Olympics in Beijing and the 2010 World Cup in South Africa.

Even if the 2014 tournament does produce the economic windfall that government officials are promising, World Cup preparations have drawn attention to embarrassing Brazilian corruption scandals and also reminded foreign observers that South America’s aspiring superpower suffers from poor infrastructure, excessive regulation, bureaucratic waste and inflexible labor markets.

Given that Brazilian politics is plagued by rampant corruption, it is not surprising that the Brazilian Football Confederation (CBF) is similarly afflicted. CBF president Ricardo Teixeira, who assumed that position way back in 1989, has been accused of massive embezzlement. These charges are receiving much greater scrutiny now that Teixeira and the CBF are playing such a big role in the World Cup planning, and they are currently being investigated by Brazilian federal police. (A decade ago, the general secretary of a Brazilian congressional commission declared that Teixeira ‘is directly responsible for creating an environment which is ripe for an administrative disaster.’)

Meanwhile, the Brazilian Supreme Federal Court is probing claims that Orlando Silva, a former senior government official, embezzled up to $23 million. On Oct. 26, Silva resigned from his job as Brazilian sports minister, becoming the fifth minister in President Dilma Rousseff’s government to leave office amid corruption allegations. (The Rousseff administration has been in power for less than a year.)

The corruption scandals have exacerbated Brazil’s more practical World Cup woes. It simply isn’t moving fast enough with the construction of the stadiums, roads, airports, and other infrastructure necessary to host the 2014 event. As MercoPress reported in mid-September, ‘Dozens of road and public transportation projects that the government has touted as the biggest legacy of the tournament are still on the drawing boards four years after Brazil was awarded the tournament.’ More specifically, according to a recent Economist dispatch, only nine of the 49 urban-transport projects scheduled for the host cities have actually begun.

The slow pace of World Cup preparation reflects deeper problems in Brazilian society. In the World Economic Forum’s 2011–12 Global Competitiveness Index, Brazil ranks 118th out of 142 countries for road quality, 121st for overall labor-market flexibility, 122nd for air-transport-infrastructure quality, 130th for port-infrastructure quality, 136th for the wastefulness of government spending and dead last for the burden of government regulation. Red tape and bureaucratic inertia are now hindering Brazilian efforts to improve infrastructure for the tournament.

Building adequate urban-transport infrastructure is an especially pressing concern. ‘The worry is very big,’ Marcos Túlio de Melo, president of the Brazilian Federal Council of Engineering, Architecture and Agronomy (known by the acronym CONFEA), recently told the BBC. ‘The mobility works are not as advanced as the stadiums. A lot of projects have not even been presented. We should have the works in progress, but we lack the maturity to plan.’

The shoddy state of Brazilian airports is another big problem. Back in July 2010, Teixeira said of World Cup infrastructure development, ‘The three main priorities we have are airports, airports, airports.’ Yet this past April, the Brazilian Institute for Applied Economic Research said that only two of the thirteen airport-expansion projects undertaken for the World Cup were on track to be finished by June 2014, when the tournament commences. As the Miami Herald points out, many Brazilian airports ‘are barely up to the task of handling rapidly growing domestic air traffic.’

Finally, there is violent crime. Brazil has a significantly higher murder rate than Mexico, and its youth homicide rate almost doubled between 1998 and 2008, according to a report earlier this year from the justice ministry. The author of that report, sociologist Julio Jacobo Weiselfisz, told the Associated Press that the youth murder rate ‘has reached epidemic proportions.’ Of course, South Africa is one of the most dangerous countries on earth (outside of war zones), and yet it managed to provide robust safety and security for the 2010 World Cup. Can Brazil do the same in 2014? Organizers hope so, but the challenges are immense.

‘Brazil feels like a country poised for greatness, while flirting with ignominy,’ Sam Green wrote recently in the London Independent. Hosting the World Cup may yet serve to enhance its global image. Thus far, however, tournament preparations have done the opposite.